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Walgreen May Offer Traders
Cheap Plays on Profit Report

Investors looking for a good bargain might want to consider Walgreens.

No, don't rush out to the drugstore -- they aren't having a sale on antacids -- but consider options on the retail chain's parent company
Walgreen Co.

That's because, despite the fact that the company reports earnings on Monday, these options are fairly inexpensive, say Goldman Sachs options strategists Maria Grant and John Marshall.

Ms. Grant and Mr. Marshall say there are good reasons to be bullish and buy calls. These reasons include solid fundamentals, compelling valuations and benefits associated with the Medicare prescription-drug program and the generic-drug boom.

With the stock at $44.57 in 4 p.m. New York Stock Exchange composite trading, the April 47.50 calls have an ask price of 20 cents. Based on that price, and the assumption that implied volatility -- and therefore option prices -- will dip after the earnings are announced, Ms. Grant and Mr. Marshall said a buyer of these calls needs to see the stock rise only 1.7% in order to break even by the day after earnings are announced.

Of course, cheap options also provide a good reason to pick up protection against a possible decline. Walgreen's April 42.50 puts, for example, saw some trading yesterday. About 2,147 of these changed hands and rose 5 cents to 25 cents on the International Securities Exchange.

More than 23,600 puts on the stock changed hands, which is more than twice as many as traded on any given day in February. Implied volatility on the options ticked higher to 38%, according to Track Data.

Micron is due to report its fiscal second-quarter results in the first half of April, a spokesman confirmed. Options traders could also be focused on Wednesday's news that
Microsoft Corp.
MSFT -1.19%
is delaying the launch of its Vista operating system or the fact that Micron's acquisition of Lexar Media Inc. is facing increased opposition from a growing number of Lexar shareholders.